Written by Cláudio Afonso | LinkedIn | X
Nasdaq has published a filing on Thursday suggesting amendments to its rules concerning the stocks trading below $1, aiming to implement a faster and more stringent delisting process for non-compliant companies.
Under the new rule, Nasdaq will target companies that use reverse stock splits as a strategy to meet the $1 per share minimum price requirement.
Currently, Nasdaq requires companies to maintain a closing price above $1. Companies that close below this threshold for 30 consecutive trading days are given 180 days to regain compliance.
If the stock price remains below $1 after that period, the companies can still request an additional 180-day extension.
At the end of this second period, companies can still appeal to a Nasdaq hearings panel, which pauses the delisting process and allows them to remain listed for an extended time before Nasdaq makes a final delisting decision.
As of Thursday, there were 421 penny stocks on Nasdaq— as the stocks trading below $1 per share are call usually named. In early 2021, there were fewer than a dozen according to the WSJ citing data from Dow Jones Market Data.
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Under the proposed rules, companies whose share price stays below $1 for 360 trading days would be immediately suspended from trading, with no opportunity to appeal.
Furthermore, any company that has executed a reverse stock split within the past year and drops below $1 again would be subject to automatic delisting.
Electric vehicle stocks such as Faraday Future, Mullen Automotive, Polestar, and Canoo could be impacted by these new rules if they continue registering significant losses over the next months.
Faraday Future’s stock is currently trading at 22 cents as it recently received the approval of a reverse stock split from its shareholders.
The company waits now for the decision of the split range that will be defined by the Board of Directors. In the last year, the stock lost 99.65% of its value.
The California-based EV startup Mullen Automotive finds itself in a similar position after undergoing several reverse stock splits in recent years. Despite efforts to raise its share price, Mullen’s stock is currently trading at around 64 cents, representing a 99.37% decline over the past 12 months.
Polestar, a brand under the Geely Holding Group, is also on Nasdaq’s radar as it struggles to stay above $1 per share until January 2, 2025. The stock is currently trading at 65 cents, having hit a new all-time low of 61 cents earlier this week.
So far, the company has not announced intentions to seek approval from shareholders for a reverse stock split.
However, that’s a possible scenario for later this year for the Geely-backed electric vehicle manufacturer that saw its shares losing 83.60% of its value over the last 12 months.
In March, the Oklahoma-based EV maker Canoo executed a 1-for-23 reverse stock split guaranteeing the compliance with the Nasdaq listing rule.
In January, the company’s CFO publicly forecasted between 3,000 and 5,000 deliveries for this year. However, official documents revealed that Canoo expected to deliver fewer than 300 units of its two primary models, the LDV 130 and LDV 190.
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Written by Cláudio Afonso | LinkedIn | X
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